High energy costs and the UK’s emissions targets are making life hard for the UK’s steel, cement, ceramics and other core industries who are warning that thousands of jobs could be at risk without more government support for companies in the energy intensive sector.

A report produced by the TUC and the Energy Intensive Users Group (EIUG) has stated that there are currently 800,000 people working in the UK’s energy intensive industries (EIIs). It states that this sector contributes £95bn a year to the economy – a fifth of the UK’s manufacturing total – but warns that heavy energy users are operating under difficult conditions and, without ministerial action, jobs and investment could be lost to overseas competitors.

The report, ‘Building Our Carbon Industries’ claims that in recent years, UK EIIs have significantly improved their energy efficiency and are much greener than many of their global competitors. However, the high cost of energy and the technology needed for them to move across to a low carbon economy means that further green progress is at risk without a proper government industrial strategy.

Last week a report from the Department for Business, Innovation and Skills (BIS) warned that the UK’s heavy energy users were paying at least double the amount in renewable energy subsidies and greenhouse gas emission standards that their competitors in Europe are paying. The report claims that this, combined with the soaring cost of energy and the impact of the recession, means glass, refined petroleum and other chemical producers are particularly hit hard.

‘Building Our Carbon Industries’ also claims that firms manufacturing steel, cement, chemicals, paper and other energy intensive products currently directly employ 160,000 people, with an estimated four times that working in the various UK supply chains.

The report goes on to say that EIIs have a combined spending power of £68.6bn, and with an average additional contribution to the economy of £38,000 per employee, it’s not hard to see the significant contribution the energy intensive sector makes to the UK economy.

Pointing to the recent closure of the Rio Tinto Alcan aluminum smelter in the North East and the Thamesteel plant in Kent, the report warns that if more EIIs like these disappear, not only will there be a loss of jobs, output and tax revenues, global carbon emissions will also soar as the UK has to import materials from less energy efficient producers.

TUC general secretary Brendan Barber said, “The UK’s energy intensive industries could become world leaders but they are currently struggling. Criticised as high polluters in the past, heavy energy using factories and power plants have slashed their CO2 emissions but still need significant amounts of energy, and this is costing them dear.

“An unforgiving tax environment combined with the failure of the banks to lend means not much money is available to invest in the new industrial processes and technologies like carbon capture and storage – essential developments if an industry which is so key for jobs and for our economy is to survive.

“Unfortunately ministers seem happy with their hands-off approach, but our energy intensive industries are too important to be allowed to fail. Ministers could learn much from Germany – there the government has created the right economic and political conditions so its high energy users can remain competitive. We urgently need the same approach here.”

EIUG Chairman Steve Elliott added, “We have to face facts – Britain’s energy policy isn’t working. We all want to see a greener society, with British industry manufacturing the very products and technologies needed to deliver those improvements, but we can’t do this with one hand tied behind our backs.

“We want the UK government to look at this report, appreciate the role of unions and employers in working together, and allow our industries to help Britain’s green growth.”

‘Building Our Carbon Industries’ makes a number of recommendations including:

• Ministers should adopt a hands-on approach to EIIs to help prevent the possible closure of factories and heavy plants, and the potential loss of thousands of jobs.
• The development of an industrial strategy linked to both energy and environmental policy, which would allow the creation of the world’s most energy efficient EIIs here in the UK.
• A change to the rules so that the green investment bank is able to borrow when it becomes operational next year, allowing much needed funds to be channelled into emerging low carbon technologies.
• The government should share the burden of environmental taxes across the economy, creating a more favourable climate for high energy companies with more tax relief on energy costs.